Essays in international trade and financial economics

by Lai, Huiwen

Abstract (Summary)

Essay in international Trade and Financial Economics
Ph.D. Thesis (2000) by
Huiwen Lai
Department of Economics
University of Toronto
This thesis includes three essays related to international
economics and financial economics. The first essay presents a
mode1 of trade in the presence of multinationals, asymmetric
trade barriers, and international differences in production
costs. The first part of the essay presents the rnodelrs
implications for bilateral trade. The estimation reveals more
reasonable parameters for elasticity of substitution and trade
costs than that suggested by previous research. The simulation
indicates that tariff liberalization will shift trade f rom
rich countries to poor countries and from preferential trading
areas to inter-continental trading partners. The second part
of the essay derives the multinational production and export
equations Fmplied by the mode1 and estimates these equations
simultaneously by recognizing the cross-equation restrictions
on parameters and error terms. It suggests that the
elimination of tarif
f
s would substantially increase U. S.
exports, but would not affect U.S. production abroad. The
second essay models general equilibrium product price effects
using the CES monopolistic competition model in international
trade. We then estimate the model and, mimicking computable
general equilibrium (CGE) models, use the model to estimate
the compensating variation associated with trade
liberalization. We find gains from trade liberalization that
are much larger than those usually reported. In addition,
extensive specification testing is conducted to evaluate the
performances of this model and its alternatives. The results
point to the types of model specifications needed before the
model can usefully be applied to policy questions. The third
essay
studies the properties of Canadian interest rates
relative to those of U.S. In sharp contrast to the U.S.
evidence, the conditional variances of Canadian macroeconomics
variables are found to be insignificant predictors of term
premia in the Canadian T-bill term structure. However, the
conditional variances of U.S. macroeconomic variables are
found to be important deteminants of Canadian premia.